Forecast: O.C. can expect modest job growth

Bradley Zint

As taxation and other costs go up in California, one place is looking better and better: Walla Walla.

Moving to the eastern Washington town of some 32,000 — where you can rent a mansion for $2,500 a month, have a short commute and not pay state income taxes — was one of the take-aways from economist Esmael Adibi at Chapman University's 35th annual Economic Forecast.

"You might say this is a joke," Adibi told the audience at Segerstrom Hall in Costa Mesa. "It's not a joke."

He used the point to conclude that California is deteriorating its tax base as it experiences a significant loss within the high-income tax bracket.

His evidence: California state income tax-return numbers between 2006 and 2009 show a sharp decline in high-income tax earners.

"I submit that some of these people are people who have changed residency," Adibi said. "And this is what is going to be our dynamic problem. If we keep on increasing taxes, we're going to make it less attractive here."

The other bottom-line conclusions for the state and local economy in the coming year from Adibi, who directs Chapman's A. Gary Anderson Center for Economic Research, were more positive: job growth, albeit weak; slim gains in real income; mild improvement in consumer spending; gradual rebounds in home prices; and, for now, a better outlook on the state's budget.

Chapman University President James Doti, who gave a presentation forecasting the 2013 U.S. economy, gave predictions that included a slow but steady economic recovery, a nearly 2% increase in consumer spending, and housing that is more affordable than ever but subject to a tight supply.

"In terms of numbers since the recovery began, there have been 14 quarters of recovery since the Great Recession ended," he said, adding that the economy is 7% higher since then.

Chapman researchers based their predictions on a $200-billion fiscal cliff, comprised of $150 billion in tax increases and $50 billion in tax cuts.

"We think the payroll tax increase will occur, but we don't think that there will be higher rates for most taxpayers in the U.S., and that accounts for this drop" to $200 billion instead of $500 billion, Doti said.

The national rate of vacant homes is nearly 2%.

"We are currently at a position where there's no more excess housing," Doti said. "If people want to buy a house, somebody has to build it, and that will positively affect residential construction."

The university's annual economic outlook is "based on the comprehensive database and an econometric model developed by Chapman faculty and students," according to its website.

Chapman's Economic Forecast update conference is scheduled for June 12 at Segerstrom Hall within the Segerstrom Center for the Arts, 600 Town Center Drive, Costa Mesa.